Tax Rounds - Newsletter for December 2025

Make sure to get your end-of-year tax questions answered, so you can focus your attention on what you do best.

What’s new at TaxSmart MD?

In the tax season calendar, November and December is the “calm before the storm.”  I’ve been working on some of the process improvements described in the November newsletter.  The main goal over the next month will be to complete end of year planning for all current clients.  This primarily entails getting updated income numbers and making sure that the projection I prepared of your likely tax liability is still on target.

Otherwise, I’ll be working on getting a questionnaire ready for tax season.  The goal with this is to get as much information as I need to complete your tax return, but also make sure that I captured everything that may or may not have been encapsulated in your tax return documents from 2024. 

A good tax preparer doesn’t prove their worth in processing data that the taxpayer provides.  They prove it by knowing the right questions to ask that the taxpayer may not have thought was important.

I will try to be complete and thorough in gathering information, but without making it too much of a burden on clients.  One reason that I started this service was so I could gather more information from my clients throughout the year, rather than in a compressed two-and-a-half month tax season.

I haven’t made a final decision, but I’m leaning towards creating a template questionnaire in Tax Dome and customizing it for each of my clients.  I will update clients on how this will work as we approach the beginning of 2026.

December availability:

Currently, I’ve blocked my schedule from 12/22 - 12/28 for the Christmas holiday, but I may adjust these dates depending on my schedule.  For all clients who would like to meet before the end of the year, I’m hoping we can finish those by Friday, December 19th.

What’s New in the Blog:

Don’t Fall for the “Important New Business Documents” Trap - Having opened an LLC in two different states and filed a DBA, I’ve gotten a slew of these things in the mail, and I know it’s no different for my clients. Getting scammed is awful, but there’s also a certain satisfaction in spotting them and knowing you won’t be a victim.

Paging Dr. Double Tax: When Two States Want a Cut of Your Income - There are special wrinkles for how the mechanics work in certain states, but generally, if you have income from a state in which you aren’t a resident, you pay the higher amount of the tax calculated by both states on that income.

Should Solopreneurs Add a Cash Balance Plan? - Occasionally, I talk to doctors who are taking advantage of all the “low-hanging fruit.”  They’ve maxed out their solo 401k’s, HSA contributions, and done Backdoor Roth IRA’s for each spouse.  They may also have contributed to 529’s for their kids.  If they still have healthy cash flow and want to bring down their taxes, a cash balance plan might be the next lever to pull.

As with other qualified retirement plans, the decision dynamic is much different if you have non-highly-compensated employees to account for.

Why Your Marginal Tax Rate Isn’t 24% - When you decide whether to take a deduction now and pay tax later, or vice versa, the first question to ask is what your marginal tax rate is now, and what it may be later.  Conventionally, most people will look at their income and see which tax bracket it falls in, but that’s only part of the story.  Two taxpayers may have the same taxable income, but one may actually keep much less of their extra income because state taxes, student loan payments, loss of deductions, and other nuances come into play.

Outside News and Views:

Do You Need a Tax Strategist (WCI)? - When I started TaxSmart MD, I wanted the service to be planning-centric.  However, I felt uncomfortable marketing myself as a “tax strategist” for many of the reasons Jim Dahle lays out in this blog post.  First, it incentivizes recommendations of tax deferral strategies for the short-term savings.  Second, there aren’t many free lunches (you can invest in oil and gas or short-term rentals, but that involves trade-offs and personal sacrifice).  Third, I don’t want my clients to play the “audit lottery.”  If you do get audited, I want to make sure that I can defend any strategies we’ve both signed off on.

DC Creates Local Child Tax Credit (WP) - Washington will be the first city in the country to do this.  It will be interesting to see if other municipalities follow suit.

Some Democrats Want to Upsize Trump’s New Tax Cuts (WSJ Gift Article) - The politics are nauseating, but I can’t help myself from trying to read the tea leaves on future tax policy.  2029 is not that far off, and there will be pressure to extend many of the OBBBA tax breaks set for expiration.  I also wonder if some states will introduce bills to exempt overtime and tips from taxation.

Trump’s ‘No tax on tips’ could be end of large-group service fees on restaurant bills - This will be rocky to implement. I expect that this will not be a smooth adjustment for diners, either. I think we can’t assume that the bills we receive will or won’t include service fees, so we need to take a close look at the receipts.

I write about money. Yet I nearly forfeited a $3,000 reimbursement (WP) - I think most of us can relate to this.  Personally, all the maximizing strategies I developed to build wealth in my 20’s don’t work nearly as well now, in my 40’s.  A couple of years ago, I was working on a credit card bonus, but failed to meet the minimum spend in the three-month period and still paid the $299 annual fee.  Now, I try to have fewer spinning plates to worry about.

How Capital Gains Are Taxed: Short-Term Vs Long-Term Gains (PSG) - A good basic overview of capital gains taxes

Wait, you can deduct this??

Clarinet Lessons

The key point here is that the child had a severe malocclusion of the teeth, and this was recommended by the orthodontist.

Also, this was taken as an itemized deduction (Schedule A).  Presently, you can only deduct medical expenses that exceed 7.5% of your Adjusted Gross Income.  So, even if your child does have a similar condition, I hope the lessons (and any other eligible medical expenses) cost much less than 7.5% of your income.

That’s it for December!  Thanks for reading, and email me at logan@taxsmartmd.com if you think of any questions, or have other topics you want me to cover in the blog or newsletter!